UK - The Environment Agency's £1.5bn (€1.9bn) Active Pension Fund has awarded three new global equities mandates following the termination of contracts by State Street Global Advisors (SSGA) and Capital International.

The Environment Agency revealed the £185m mandate has been split between three firms, with RCM managing £100m, Generation Asset Management taking on £50m and the remaining £35m awarded to Impax Asset Management.

It confirmed the new mandates were funded by the termination of a £67m global equities contract run by Capital International and the ending of two mandates by SSGA - £73m in global equities and £35m in UK equities - alongside a further £10m sourced from the passive global equities mandate run by Legal & General.

The Environment Agency said the decision to terminate the two contracts was based on a review of financial performance and client servicing, while the new appointments formed part of the organisation's plan to have its assets managed by signatories of the United Nations Principles of Responsible Investment (UNPRI).

It confirmed some of the reasons the three new firms were chosen from almost 50 applicants were their strengths in the "integration of financially-material environmental risks and opportunities" and "active participation" in the UNPRI.

The contracts have all been awarded on a three-year term - although it can be extended subject to satisfactory performance - with an outperformance target of +3% per year, and they will sit alongside an existing £135m mandate run by Sarasin & Partners.

In addition, the pension fund warned each manager will be individually evaluated on their delivery of the scheme's environmental overlay strategy - which includes integration of environmental considerations into risk management, stock selection, company engagement, proxy voting - against benchmarks based on corporate governance and responsible investment indices.

Howard Pearce, head of environmental finance and pension fund management for the Environment Agency, said officials believe the appointees possess the necessary investment processes, research and staff to "deliver our demanding financial performance targets".

"These appointments also evidence our opinion that fund managers who seek to take into account financially-material environmental risks and opportunities, such as climate change, in their investment decisions, will produce better financial returns for the beneficiaries of our pension fund, and this is entirely consistent with our fiduciary duty," added Pearce.

As a signatory to the UN PRI and member of the UK Social Investment Forum (UKSIF), among others, the pension fund revealed it would publish a report on its processes in evaluating the tender applications in an attempt to assist other pension funds in the selection process and to help the market development for responsible investment products.

The pension fund's asset allocation is currently split with a dominance of 63% in equities - split equally between the UK and global, alongside 27% in fixed income, shared between gilts and bonds, while 5% is allocated to property and 5% is in private equity.

Elsewhere, the trustees of the £200m Inchcape Group Pension Fund have appointed Punter Southall to provide actuarial services for the scheme, with the aim of developing "relevant solutions to the issues" the pension fund faces.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

Topics